Choosing monetary sequences: theory and experimental evidence

Manzini, Paola, Mariotti, Marco and Mittone, Luigi (2010) Choosing monetary sequences: theory and experimental evidence. Theory and Decision, 69 (3). pp. 327-354. ISSN 0040-5833

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Abstract

We formulate and investigate experimentally a model of how individuals choose between time sequences of monetary outcomes. The model assumes that a decision maker uses, sequentially, two criteria to screen options. Each criterion only permits a decision between some pairs of options, while the other options are incomparable according to that criterion. When the first criterion is not decisive, the decision maker resorts to the second criterion to select an alternative. We find that: (1) traditional economic models based on discounting alone cannot explain a significant (almost 30) proportion of the data no matter how much variability in the discount functions is allowed; (2) our model, despite considering only a specific (exponential) form of discounting, can explain the data much better solely thanks to the use of the secondary criterion; (3) our model explains certain specific patterns in the choices of the

Item Type: Article
Keywords: Time preference Time sequences Negative discounting
Schools and Departments: School of Business, Management and Economics > Economics
Subjects: H Social Sciences > HB Economic theory. Demography > HB0131 Methodology > HB0135 Mathematical economics. Quantitative methods Including econometrics, input-output analysis, game theory
Depositing User: Professor Paola Manzini
Date Deposited: 07 Nov 2017 16:58
Last Modified: 07 Nov 2017 16:58
URI: http://sro.sussex.ac.uk/id/eprint/71002

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